Editor’s note: Analyze This is a quarterly look at a publicly traded restaurant company that has sparked discussion, for better or worse, among securities analysts. The comments do not necessarily reflect the views of Nation’s Restaurant News nor should any statement be construed as a recommendation to buy or sell any security.
CALABASAS HILLS CALIF. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
While still recording negative sales trends—same-store sales fell 2.4 percent at The Cheesecake Factory and 6 percent at the company’s Grand Lux Café chain—new menu offerings helped to drive traffic and the absence of discounting maintained margins, the experts say. The Cheesecake Factory introduced a smaller-portion and lower-price Small Plates & Snacks menu earlier this year, as well as a new kids’ menu. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
In addition, cost savings of more than $8 million helped boost third-quarter profit to $16.3 million, or 27 cents per share, compared with $11.8 million, or 19 cents per share, for the same quarter last year. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
Corporate revenue for the operator of 146 namesake restaurants, 13 Grand Lux Cafés and one RockSugar Pan Asian Kitchen fell 1 percent to $400.6 million. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
As casual-dining companies remain reliant on reduced expenses and more efficient operations to boost bottom lines in the face of sluggish consumer spending and lackluster sales, observers have begun to question when the benefits of cost cutting will run out. The Cheesecake Factory, they say, has found the right balance between a focus on savings and the protection of future sales. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
CHRIS O’CULLSun Trust Robinson Humphrey Inc. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
O’Cull said the key at The Cheesecake Factory was its decision to find menu alternatives without discounting prices as many competitors have. He said the success of the small plates menu helped drive the chain’s same-store sales above the segment’s average. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
“Unlike many restaurant operators, [The Cheesecake Factory] responded to the recession by developing compelling, affordable menu items that are margin-friendly, as opposed to discounting existing items,” he said in a report. “We believe this is an excellent short- and long-term menu management strategy, as the company does not risk damaging the brand’s image by discounting or cutting portions of existing items.” —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
JEFF FARMERJefferies & Co. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
Farmer called Cheesecake’s work to reduce expenses a “cost control clinic.” He added that an effort to repay $150 million of the company’s credit facility balance also has helped maintain cash. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
“Food and labor cost favorability drove the [earnings] upside relative to our model with menu development efforts, more favorable commodity contracts, supply chain initiatives, lower cream cheese prices and operational labor efforts all contributing,” he said in a report. “With development in hiatus in 2009, [The Cheesecake Factory] is a free cash flow machine and has quickly improved its capital structure standing relative to many of its casual-dining peers.” —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
JOHN GLASSMorgan Stanley & Co. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
Looking forward, Glass noted that Cheesecake’s leading position on both sales and earnings would give it an advantage during the economic recovery. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
“[Cheesecake] bucked the trend of its casual-dining peers by reporting better than expected [earnings] and [same-store sales],” Glass said in a report. “While we remain cautious [near term] on casual dining given the many prior false hopes of a sales recovery, Cheesecake appears to be one of the very few that is showing consistent progress.” —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
He noted that a return to positive same-store sales could lead to improved earnings, as just 1 percent of comparable-sales improvement could lead to as much as 8 cents to 10 cents per share in earnings, taking into account the company’s leaner cost structure. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
“This would seem to set up as an ideal play on a recovery,” he said. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
JOHN IVANKOEJP Morgan Chase & Co. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
As talk of a recovery begins and speculation on which companies are poised to prosper takes shape, experts disagree on whether casual dining can again return to its heyday. There also is disagreement on which publicly traded restaurant stocks may bounce back first. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
“It is difficult to argue against the margin and sales progress achieved at [Cheesecake],” Ivankoe said in a report, “and we particularly commend management for improved guest satisfaction scores during this time. However, we believe greater stock price appreciation remains at other lower-multiple names with lower-set expectations, such as [Darden and Brinker].” —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
He said that a return to peak restaurant margins, about 17 percent in 2002, would be unlikely. Cheesecake currently reports restaurant margins of about 13 percent. —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
“We think consistent escalation of costs such as labor, insurance, utilities and health care matched with several years of declining new unit volumes will prevent such a peak from being realistically achieved,” he noted.— [email protected] —The Cheesecake Factory Inc., by posting a 38-percent increase in profit and segment-leading same-store sales in its latest quarter, provided a master class on cost-saving and sales-building initiatives, said many of the analysts that cover the company.
